How to Invest in Mutual Funds Ph

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You have heard this before: if you only put your extra money in a savings account without it working for you, then you’re missing a lot.

With Mutual Funds as your investment, you can let your money work for you. But first, do research first and you should carefully define your goals, time horizon, risk appetite and other factors.

In the Philippines, even as low as P5,000 (or even P100), you can start access professionally-managed Mutual Funds, equities, bonds and other securities.

What is a Mutual Fund?

A Mutual Fund (MF) is a pooled fund where a professional fund manager places the collected money to an investment instrument with the goal of growing it.

The pooled funds are invested in different types of asset instruments listed below. The best thing with Mutual Funds is that even as low as P100, you can “ride” on the expertise of fund managers with years of experience as deep as 45 years (e.g. Mr. Sy of PhilEquity).

Types of Mutual Funds

There are different types of mutual funds that match the investor’s goals and profile. The types of mutual funds are primarily categorized based on 3 factors: Fund Instruments, Risk Profile, and Investment Horizon that should match a client’s financial goals.

1. Money Market Funds

2. Bond Funds

3. Balanced Funds

4. Equity Funds

5. Equity Index Funds

Below are factors that can help you choose which Mutual Fund is best for you.

Type of Mutual Fund

Risk

Description

Recommended Time Horizon

Money Market Funds

Minimal or Conservative

The fund is lent to government or corporations. It also includes time deposits and special savings accounts.

Short-term (less than a year)

Bond Funds

Minimal or Conservative

The fund is usually grown by lending to government and corporate as debt.

Short to medium term (1-3 years)

Balanced Funds

Moderate

Combination of fixed income (lent to burrowers) and various companies in the index.

Medium term (3 – 5 years)

Equity Funds

Long-term Growth and High Risk

Investments are placed in companies listed in stocks exchange.

Long term (more than 5 years)

Equity Index Funds

Long-term Growth and High Risk

Replicates the performance of PSEi through blue-chip stocks.

Long term (more than 5 years)

Pros and Cons of Mutual Funds

Advantages

1. Time-saver. you don’t have to check your account everyday to see the stock performance. Someone manages it for you which results in…

2. Professional Management. More time for your own endeavors. Unless you are a trader yourself handling all those big amounts of money, you may want to entrust it to a person who has spent many years in growing funds.

3. Less Guilt or Regrets. If you manage your own stocks or funds, tendency is to blame yourself if your decision led to losses. Except that if you already have the Buffet-like skills in investing, you may always not regret your decisions.

Top Mutual Funds in the Philippines

The following list of top or best performing mutual funds were based on the most important categories that determine the ranking of the Mutual Fund instruments.

Categories to Measure in Determining the Best Mutual Fund

Top performing funds are based depending on a chosen metrics or category. The most useful categories are:

Risk Profile: Aggressive, Balanced and Conservative.

You should be able first to identify your risk appetite, or the rate of fluctations in your money, before you invest in MF.

Time Horizon: Know how long you are comfortable placing your money in the fund. Determine the time that you’ll withdraw it so you know what metrics to look at, and if it’s in the scope of the fund’s holding period.

1-year performance

3-year performance

5-year performance

Performance since inception

Company profile: Knowing what company manages the profile, who’s the fund manager, his/their experience, historical track record and more.

Funds that are in the shorter time horizon may use the 1-year fund performance. Such funds include Money Market Funds and Bond Funds.

Other factors to consider are fund size, fund manager’s profile and destinations of the investment may also be considered.

Best Performing Funds of 2019

Bond funds were the best performing asset class in 2019 with an average return of 8.7% compared to stock index funds’ 4.9% and stock funds’ 1.0% average gain.

Source: COL Fund Source

Top Mutual Fund (Aggressive Category)

The Philequity Fund is suitable for investors with high risk tolerance and long-term investment horizon. The fund aims to provide investors with long-term capital appreciation by investing primarily in equity securities of listed Philippine companies.

Longest-running equity mutual fund in the country with a robust track record due to its effective stock-picking approach.

Fund size has already ballooned though to P11.6B as of end-Oct making its performance more tied to the movement of the Philipine Stock Exchange Index (PSEi) over the recent periods.

Stock selection is now more focused on index and large cap names soinvestors can expect that the Philequity Fund will largely move in linewith and only have

Top Mutual Fund (Balanced Category)

The Sun Life Prosperity Balanced Fund is suitable for investors with moderate risk tolerance and long-term investment horizon. The fund aims to provide investors with income and capital growth by investing in a mix of debt and equity securities.

One of the largest funds in the balanced fund category with a total asset size of P10.0B as of end-September.

Currently targets an equal 50-50 split between equity and fixed income exposure, but bias and higher weight towards an asset class still an open possibility depending on the call of the chief investment officer

Portfolio is largely a mix of the Sun Life Prosperity Equity Fund and the fixed income funds of Sun Life.

Top Mutual Fund (Conservative Category)

The Sun Life Prosperity Bond Fund is suitable for investors with low risk tolerance and medium-term investment horizon. The fund aims to provide investors with regular returns and principal preservation by investing in risk-free local government securities and high-quality corporate debt securities.

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